‘Net­flix is in­her­ently a tech­nol­ogy firm’

Business Standard - - COMPANIES -

Even as Net­flix and Ama­zon’s rev­enues have grown over 30 per cent, their debts have grown by 50 per cent and more over 2014-18. Ap­ple, Com­cast and Dis­ney did much bet­ter, with low debt lev­els and high growth of free cash flow. These were among other in­sights on the eco­nom­ics of stream­ing video from the US, China and In­dia shared by VIVEK COUTO, ex­ec­u­tive di­rec­tor, Me­dia Part­ners Asia (MPA), with

Vanita Kohli-Khan­dekar. The Sin­ga­pore-based MPA re­searches for and con­sults with some of the big­gest me­dia firms across the Asi­aPa­cific re­gion and in the US. Edited ex­cerpts:

Key in­sights from MPA’s re­search?

One, cheap debt and in­vestors fo­cused on growth-based val­u­a­tions as op­posed to prof­itabil­ity has driven the rise of Net­flix and, to some ex­tent, Ama­zon.

Two, YouTube and the po­ten­tial fu­ture Face­book are the big­gest dis­rup­tive in­flu­ences in APAC (Asia-Pa­cific). Nei­ther is aligned to a di­rect value-ac­cre­tive con­tent busi­ness model. Both are tied to two firms that have enor­mous

scale in Asia to­day (exChina) and con­trol an ad spend pie that is far big­ger than the con­sumer sub­scrip­tion pie for video. YouTube has driven en­gage­ment in mar­kets and is grab­bing a lion’s share of ad dol­lars away from lo­cal TV. In In­dia, to some ex­tent Korea and Aus­tralia, key lo­cal TV play­ers have gone on­line and wrested back some share, with In­dia prob­a­bly the most ma­te­rial to date.

Three, Net­flix and Ama­zon are in­vest­ing a sig­nif­i­cant amount in lo­cal premium and mass con­tent, es­pe­cially Ama­zon in In­dia. Apart from Zee, the only other player that’s done that has been Star, led by 21st Cen­tury Fox. Now, as it be­comes part of Dis­ney, it will be in­ter­est­ing to see how it ex­tends that man­date into other parts of Asia as it goes D2C (di­rect-to­con­sumer) in key Asian mar­kets and tries to grab a larger share of the ad­ver­tis­ing mar­ket.

Four, tech­nol­ogy and sto­ry­telling are im­por­tant. Lo­cal IP (in­tel­lec­tual prop­erty) and depth is crit­i­cal, and pro­vides a deep con­nect for au­di­ences. Engi­neer­ing the con­sumer ex­pe­ri­ence of the con­tent is also crit­i­cal and that’s why FANG (Face­book, Ama­zon, Net­flix, Google) has a com­pet­i­tive ad­van­tage, while play­ers like Hot­star have in­vested in tech and re­search & de­vel­op­ment.

Ad­vice for In­dian OTT play­ers?

OTT or in­ter­net TV is a dis­tri­bu­tion means, just like TV. The key is sto­ry­telling and IP; how it trans­lates across on­line for con­sumers and ad­ver­tis­ers — in en­ter­tain­ment, sports and the tech that drives it and pro­vides the plat­form for a great con­sumer ex­pe­ri­ence.

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